No. of Recommendations: 13
There's a reason why rule #1 is number 1 - - - especially when you are responsible for many people who entrust you their money. And in the case of the Berkshire Hathaway of today it's not as if they give you a small portion of their assets to speculate with it, in the hope of doubling it within 5 years.
That part of the assets would be for Fairfax, not Berkshire! Doubling in 5 years would require 14% a year in returns, and while Watsa still talks about the 15% number, Buffett has virtually promised us not to get more than the market average plus 0-2%, which probably means less than inflation, in the next 5-10 years.
But seriously, I think the point of the "Be greedy when others are fearful" idea is not to speculate with assets that have a chance of making a big return, it's buying great businesses cheaply when the market is in a panic. The big insight is that the greatest part of most companies' value lies far in the future, and some present catastrophe actually doesn't affect the long term value very much. Of course it has to be a good business, and the present catastrophe has to be survivable - you don't buy WeWork just because there's a glut of office space on the market and the market thinks they will go bankrupt. It means you buy a railroad, even if this year's volumes are bad, or you buy a company that makes a drink people have been drinking all their lives, or a solvent bank that is embroiled in a scandal that can be dealt with.
DTB
